CNBC:

What changes has the directive of the third plenary session brought to the fiscal relationship between the central and local governments? In which areas are these changes mainly reflected? Thank you.

Wang Dongwei:

Mr. Wang Jianfan will answer your questions. 

Wang Jianfan:

Thank you for your questions. The fiscal relationship between the central and local governments is a fundamental component of our government structure's division of powers and responsibilities. Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at its core has attached great importance to the adjustment and improvement of this intergovernmental fiscal relationship. We've made advancements in deepening fiscal and tax system reforms, achieving multiple breakthroughs and significant progress. We've essentially completed reforms delineating fiscal powers and expenditure responsibilities in key areas. We've also made timely adjustments to revenue allocation between central and local governments, gradually improved the fiscal transfer payment system, and pushed forward with reforms of fiscal systems below the provincial level. Fiscal system reforms have been crucial in enhancing the central government's macroeconomic control capabilities, motivating local governments to drive economic development, and promoting the formation of a unified national market. These changes have effectively propelled sustained and healthy economic and social development.

The third plenary session of the 20th CPC Central Committee laid out a series of new directives for reforming and improving the fiscal relationship between the central and local governments, setting clear goals and directions for deepening fiscal system reform.

In terms of revenue division, we will place more fiscal resources at the disposal of local governments and will expand the sources of tax revenue at the local level. We will take steps to move excise tax collection further down the production-to-consumption chain, with the power of collection steadily being passed to local governments, while optimizing the ratio for taxes shared between the central and local governments. We'll standardize the management of non-tax revenues and appropriately delegate some non-tax revenue management authority to local governments, allowing them to implement differentiated management based on local conditions.

In terms of transfer payments, we will improve the system of transfer payments, overhaul special transfer payments, and increase the scale of general transfer payments. These will help ensure that the fiscal resources of prefecture- and county-level governments are commensurate with their powers. We will establish incentive and constraint mechanisms through transfer payments to promote high-quality development. We will focus on overhauling special transfer payments and increasing the scale of general transfer payments. This aligns with the goal of reforms to place more fiscal resources at the disposal of local governments.

Regarding the division of fiscal powers and expenditure responsibility, the central government will hold more fiscal powers as appropriate and raise the proportion of central government expenditure accordingly. In principle, the expenditures commensurate with such powers should be allocated from the central government, and such powers to be delegated to local governments should be reduced. No requirements for supporting funds from local governments in violation of regulations shall be made. When it is necessary to delegate fiscal powers to local governments, the relevant funds should be arranged through special transfer payments. 

Following the guiding principles of the third plenary session of the 20th CPC Central Committee, the MOF will make efforts to establish a fiscal relationship between the central and local governments that features well-defined powers and responsibilities and the appropriate allocation of resources, with an optimum balance between regions. We will ensure the implementation of reforms with relentless perseverance to keep the central and local governments fully motivated. Thank you.